Monthly Archives: June 2020

Coronavirus grants to businesses, employers and individuals are taxable

We are reminding businesses, employers, employees and self-employed individuals that grants from the various Government schemes to provide support during the Coronavirus outbreak are taxable in the same way as other income.

Payments made under schemes including the Coronavirus Job Retention Scheme (CJRS), the Self-Employment Income Support Scheme (SEISS), the Coronavirus Statutory Sick Pay Rebate Scheme (CSSPRS) and others are all considered to be taxable income.

The position had been set out in the various guidance documents for the schemes but has now been underscored by a series of Government amendments to the Finance Bill 2020, currently before Parliament, intended to ensure that income from these schemes is taxable.

Concerns had been raised by groups, including the Low Incomes Tax Reform Group (LITRG), that the use of the word ‘grant’ concerning SEISS, in particular, could lead to the mistaken impression that funds received were not taxable income.

While such payments are taxable income, it remains the case that the actual amount of tax due on these payments will depend on your overall tax position.

Guidance published on repaying Coronavirus Job Retention Scheme overpayments

HM Revenue & Customs (HMRC) has published new guidance detailing how employers can repay Coronavirus Job Retention Scheme (CJRS) grants if they have over-claimed and therefore received an overpayment.

If an employer has received an overpayment and is making further claims, it can offset the overpayment against the amount of its next claim. HMRC has now confirmed arrangements for employers that are no longer claiming grants from the scheme but which need to repay an overpayment.

In these circumstances, an employer needs to call HMRC to obtain a payment reference number. The money owed can be paid by Faster Payments, CHAPS or Bacs to HMRC’s accounts.

The new guidance can be viewed here.

Key dates for Coronavirus support schemes

With numerous Government schemes open to businesses and individuals to help deal with the impact of the Coronavirus outbreak, there are dozens of key dates to be aware of in the coming months, including:

30 June 2020

End date of the VAT deferral scheme. VAT Payments after this date must be paid as usual, while deferred payments must be made by 31 March 2021.

1 July 2020

Flexible furlough arrangements become available for employers of employees who have previously completed a 21-day period of furlough.

6 July 2020

P11D and P11D(b) deadline for 2019/20.

13 July 2020

Closing date for the first round of the Self-Employment Income Support Scheme (SEISS).

14 July 2020

Claims open for second round of the Self-Employment Income Support Scheme (SEISS).

31 July 2020

Deadline for the submission of Coronavirus Job Retention Scheme (CJRS) claims for period of furlough up to 30 June 2020.

Usual due-date for Self-Assessment payment on account for 2019/20 Income Tax and Class 4 National Insurance Contributions (NICs). However, this is subject to an automatic deferral and you can delay your payment up until 31 January 2021.

1 August 2020

Grants from the CJRS cease to cover employer NICs and minimum automatic enrolment pension contributions.

1 September 2020

Grants from the CJRS taper down to 70 per cent of a furloughed employee’s usual wages up to £2,187.50 a month, with the employer required to contribute another 10 per cent, so that furloughed employees continue to receive 80 per cent of their usual wages.

1 October 2020

Grants from the CJRS taper down to 60 per cent of a furloughed employee’s usual wages up to £1,875 a month, with the employer required to contribute another 20 per cent, so that furloughed employees continue to receive 80 per cent of their usual wages.

31 October 2020

CJRS closes. Employees can no longer be furloughed after this date.

30 November 2020

Last date for making claims for the CJRS.

31 January 2021

Deadline for Self-Assessment payments on account deferred from 31 July 2020.

31 March 2021

Deadline for payments of VAT payments deferred between March and June 2020.

We have also prepared a PDF booklet of Government support timeframes to help clarify the support available at any point in time over the coming months.

Government publishes new ‘Covid Secure’ guidance

The Government has published new ‘Covid Secure’ guidance following the announcement that businesses in England including pubs, bars, restaurants, hair salons, barbers, hotels and bed and breakfasts may reopen from 4 July 2020.

The latest documents, prepared by the Department for Business, Energy and Industrial Strategy (BEIS) with input from the devolved administrations in Wales, Scotland and Northern Ireland, cover the following workplaces and working arrangements:

  • Close contact services, such as hairdressers, barbers, beauticians, tattooists, sports and massage therapists, dress fitters, tailors and fashion designers;
  • Hotels and other guest accommodation;
  • Restaurants, pubs, bars and takeaway services;
  • The visitor economy, such as indoor and outdoor attractions, business events and consumer shows.

Amongst the most eye-catching specific measures contained in the new guidance documents are:

  • Keeping a temporary record of customers and visitors for 21 days in restaurants, pubs, bars and takeaway venues;
  • Encouraging the use of apps for ordering;
  • Implementing staggered entry times to hospitality venues;
  • Reconfiguring seating arrangements and introducing one-way systems around hospitality venues;
  • A prohibition of live music and comedy;
  • Barbers and hairdressers should wear plastic visors when working in close proximity to clients.

The new documents add to those published in May, some of which have been updated to reflect the changed one metre plus social distancing guidance:

  • Construction and outdoor work
  • Factories, plants and warehouses
  • Homes
  • Labs and research facilities
  • Offices and contact centres
  • Shops and branches
  • Vehicles

The existing guidance documents and the new guidance documents for sectors reopening on 4 July are based on the following five principles, which have been tweaked since they were first published:

  1. Carry out a COVID-19 risk assessment

Before restarting work you should ensure the safety of the workplace by:

  • carrying out a risk assessment in line with the HSE guidance
  • consulting with your workers or trade unions
  • sharing the results of the risk assessment with your workforce and on your website
  1. Develop cleaning, handwashing and hygiene procedures

You should increase the frequency of handwashing and surface cleaning by:

  • encouraging people to follow the guidance on hand washing and hygiene
  • providing hand sanitiser around the workplace, in addition to washrooms
  • frequently cleaning and disinfecting objects and surfaces that are touched regularly
  • enhancing cleaning for busy areas
  • setting clear use and cleaning guidance for toilets
  • providing hand drying facilities – either paper towels or electrical dryers
  1. Help people to work from home

You should take all reasonable steps to help people work from home by:

  • discussing home working arrangements
  • ensuring they have the right equipment, for example remote access to work systems
  • including them in all necessary communications
  • looking after their physical and mental wellbeing
  1. Maintain 2m social distancing, where possible

Where possible, you should maintain 2m between people by:

  • putting up signs to remind workers and visitors of social distancing guidance
  • avoiding sharing workstations
  • using floor tape or paint to mark areas to help people keep to a 2m distance
  • arranging one-way traffic through the workplace if possible
  • switching to seeing visitors by appointment only if possible
  1. Where people cannot be 2m apart, manage transmission risk

Where it’s not possible for people to be 2m apart, you should do everything practical to manage the transmission risk by:

  • considering whether an activity needs to continue for the business to operate
  • keeping the activity time involved as short as possible
  • using screens or barriers to separate people from each other
  • using back-to-back or side-to-side working whenever possible
  • staggering arrival and departure times
  • reducing the number of people each person has contact with by using ‘fixed teams or partnering’

Businesses and organisations with more than 50 employees reopening from 4 July, and those already open, are expected to publish their risk assessments online, while all employers are expected to display a signed poster, which can be downloaded with the guidance here  https://assets.publishing.service.gov.uk/media/5eb97d30d3bf7f5d364bfbb6/staying-covid-19-secure.pdf. This includes contact details for the Health and Safety Executive.

The guidance documents relate to workplaces rather than sectors, meaning employers may need to have regard to more than one set of guidance in their risk assessments and reopening plans.

For instance, the guidance for close contact services, vehicles and working in other people’s homes could be relevant to a mobile hairdressing service.

Remember to reinstate your VAT direct debit in time for your next payment

If you are using the option to defer VAT payments due between 20 March 2020 and 30 June 2020 and you have cancelled your direct debit, you should now ensure that you reinstate your direct debit in enough time for HM Revenue & Customs (HMRC) to take your next payment.

After 30 June 2020, you will need to make your VAT returns and payments as usual and on time.

However, you still have until 31 March 2021 to make any VAT payments you deferred between 20 March 2020 and 30 June 2020. It is up to you whether to pay this amount in a single instalment or several instalments.

Meanwhile, it has emerged that some businesses that have deferred their VAT payments between 20 March 2020 and 30 June 2020 have received ‘failed interim payment’ letters from HMRC. The letters were sent out in error and also include the wrong telephone number, which should be: 0300 322 7873.

If you have deferred your VAT payment and have received such a letter, you may wish to clarify with HMRC by telephone that you have not paid because of the VAT deferral provisions.

HM Revenue & Customs clarifies repayments of Corporation Tax and anticipated losses

With businesses across many sectors having been hit hard by the Coronavirus crisis, HM Revenue & Customs (HMRC) has now said it will, in exceptional circumstances, consider claims for Corporation Tax repayments for prior periods based on anticipated losses, even before the conclusion of the current accounting period.

The clarification came in an update to HMRC’s internal Company Tax Manual.

Repayment of Quarterly Instalment Payments (QIPs) will require companies to submit evidence in support of claims and to demonstrate the amount of the losses they expect to incur.

Similar measures are in place in respect of the repayment of Corporation Tax paid on the normal due date for payment, which tends to be nine months and one day following the end of the accounting period.

The guidelines make clear that repayments will only be made in exceptional circumstances and that claims will be made based on the specific circumstances of each application.

While certain sections of the guidance are redacted, the Institute of Chartered Accountants in England and Wales (ICAEW) suggest that businesses provide the following information to HMRC in support of an application:

  • Up-to-date profit and loss forecasts
  • Management accounts and tax calculations
  • Details reasoning and assumptions underpinning the figures submitted
  • Reports from the Board of Directors and public statements concerning the company’s trading position
  • Evidence that the forecasts submitted are the same as those used for internal planning
  • Confirmation that the company does not expect exceptional income or gains during the current accounting period
  • External evidence demonstrating the circumstances involved are unlikely to change in the short term.

The issues involved in claiming repayments of Corporation Tax are complex and the evidence requirements are stringent, meaning the seeking of professional advice in advance of any claim is vital.

Employers given 30 days to confess to furlough fraud

Employers will be given 30 days to ‘confess’ to furlough abuses, with legislation being fast-tracked to allow HM Revenue & Customs (HMRC) to reclaim any furlough grant that is overpaid to employers, or that is not spent on wages as intended.

More than 2,000 employers have already been accused of furlough fraud by whistle-blowers, with HMRC expected to follow up targeted investigations with random compliance checks.

The draft legislation mentions ‘deliberately’ making an incorrect claim or ‘deliberately’ not using the money to pay furloughed employee costs, which should give some reassurance to any businesses that may have inadvertently submitted a claim incorrectly.

The recent update to the Coronavirus Job Retention Scheme (CJRS) also stated that the claims portal will allow employers to declare mistakes made in previous claims, and offset the over-claim against their next claim.

Guidance to the CJRS has been updated by the Government regularly, but it has always been made clear that if employers are using the scheme, then the furloughed employee must not do any work for them, which remains the case until the new Flexible Furlough rules are introduced on 1 July.

If an employer has asked an employee to carry out any work, then they will need to prove that whatever they asked them to do was neither;

  • Making money for them or any other businesses that may be linked, or;
  • Providing services to them

HMRC may find it difficult to determine the employers who have submitted inaccurate claims accidentally, through negligence or a misjudgement.

This is why it is important that all employers that have used the CJRS now review the claims that they have made to ensure that they have submitted the correct claims for each individual.

Download our Coronavirus support for business timeline

Since the beginning of the Coronavirus outbreak in the UK, the Government has announced numerous schemes to support employers and businesses.

Several of these schemes are winding down or changing in the coming months, so we have created a handy grid showing what support is available and the deadlines for accessing it.

Managing Cash

As businesses look to rebuild and recover from the trading challenges of COVID-19 in the coming weeks and months it is vitally important that they manage and maintain good cash flow to ensure they remain viable and can trade.

To manage cash flow effectively, businesses need to be able to forecast how they will perform. A well-prepared forecast can help to:

  • Predict sales performance
  • Estimate cost and spend expectations
  • Indicate when cash will come into and leave a business

Armed with this information, a business will be able to make important decisions in the knowledge that it can react effectively.

As a minimum, a business should look to compile a 30, 60 and 90-day cash flow forecast, but longer forecasts can also be useful up to a point.

Be aware that long-range forecasts may be less accurate as they will not be able to take into consideration future changes to business rules or the economy.

Preparing a forecast

The first element should be a sales forecast. This is the starting point of a profit and loss forecast, which can then be used to create a comprehensive cash flow forecast.

A sales forecast will include an estimate of how much you expect to sell in the future, normally broken down by month.

To create these estimates, you should look at your previous year’s sales figures to see whether there are any trends or seasonal variations.

You also need to take into consideration the introduction of new products or services and the expected market for these.

Additionally, if you plan to make more sales in a particular area, build that into your forecast. This should include any new contracts or retained work that is anticipated during this period.

At this stage, do not include any tax on the products or services sold as this will be incorporated later into the cash flow forecast.

The next stage, a profit and loss forecast, combines your business’s income and its costs to give you a projected profit figure for the future. By preparing this you should be able to:

  • Estimate how much tax the business will be liable for
  • Understand the costs of launching new products
  • Gain an indication of loss-leading products and/or the first indications of negative cash flow.

Be sure to include costs in the month that you incur them, rather than the month that you pay for them.

All cash flow forecasts are prepared based on payment dates, but a profit and loss forecast must be prepared based on when you incur your costs.

At this stage, you can estimate and include VAT costs into the forecast. However, large one-off costs should not be included until the final cash flow forecast.

Using the information gathered so far you should now be able to build up an idea of cash flow within the business and prepare an accurate cash flow forecast that takes into consideration sales, profit and costs.

Drawing up these forecasts for your business needn’t take long, but it doesn’t hurt to seek professional assistance to ensure that forecasts are accurate and so that you have the advice to act on the information you receive.

With the advent of the latest cloud accounting technology, it has never been easier to effectively and accurately forecast cash flow.

Helpful steps to improve credit control

An important element of healthy cash flow is the credit control process. Smaller businesses in the UK have historically struggled to recover payments, especially from larger clients.

To help, the Government has tried to introduce new legislation. However, in many cases, it has lacked the bite to be effective.

It is, therefore, often up to small business owners to improve their credit control on their own, especially during this difficult period.

To help, we have outlined some of the steps that businesses should consider taking in the coming months to improve credit control.

Create or review existing credit control procedures

Businesses should have a clear and coordinated procedure for credit control, which is followed for every sale it processes.

It should establish a realistic timetable, including all the stages that need to be completed by various team members within your business and outline credit terms that should be based on the needs of the business.

Once these elements are in place, a business can then prepare a process for chasing payments, including a schedule for sending reminders, including an initial notice of prompt payment, followed by letters, emails and phone calls.

This process should also establish when it might be necessary to pass a debt over to a reliable, commercial debt collection agency.

Having a record of this process ensures that all the parties to a sale are aware of the terms and conditions and, in addition, will help to reduce the problems associated with late payment before they even occur.

Research new clients

A small amount of due-diligence beforehand can help to streamline the credit control process. Undertaking a simple credit report on a new customer can help to reveal if they have had any issues making payments previously and identify which businesses pose the greatest risk to cash flow.

Credit checks can be conducted quickly and cost-effectively online and, in most cases, you will only need a company’s:

  • Full trading name
  • Registration number
  • Address(es)
  • Key contact details

Undertaking these checks is no guarantee of payment, of course, but it allows a business to make informed decisions about the terms and conditions associated with each transaction.

As part of this review process, it is worth creating a watch list of potential late payers who can be carefully monitored so that action can be taken to prevent late payment.

Foster positive working relationships

Obtaining payment isn’t just a process of making demands or threats. Creating a lasting, positive relationship and clear channels of communication can go a long way in helping to obtain timely payments.

It doesn’t hurt to make courtesy calls to confirm receipt of paperwork or in advance of the invoice due date. This shows that a business is friendly and professional and allows a customer to give prior warning of late payment.

Be quick, be accurate

It isn’t just the responsibility of customers to ensure payments aren’t late. Ensuring your invoicing procedures are effective can make a massive difference. It is recommended that businesses:

  • Send invoices as soon as orders are fulfilled
  • Email or send invoices electronically rather than sending by post
  • Ensure that the invoice is addressed to the right person
  • Make sure that there are no mistakes in the invoices
  • Confirm that the invoice has been received.

Acting early prevents delay and helps to build a rapport with your customer.

Incentivise 

Businesses struggling with late payments could look to add incentives to the credit-control process.

This could be something as simple as offering early settlement discounts to customers that are known for late payments that kick in when they pay within the agreed credit terms.

While this may seem like rewarding bad behaviour, it may mean that your business is paid sooner. These incentives can also be incorporated into your pricing structure so that profit margins are not affected.

Make payments easier 

There has never been more choice when it comes to payment methods, so businesses should make sure that they can offer as many as possible. This may include:

  • BACS
  • Credit/debit card
  • Cash
  • Online payments, such as Stripe and PayPal

Seek support and advice

If your business is continually blighted by late payments and you are struggling to deal with the burden of credit control then it may make more sense and be more cost-effective to seek out professional support.

Outsourcing your credit control to an accountant could drastically improve your chances of being paid on time and it should give you an idea of how your cash flow is affected by expected late payments.

This will help you to make informed decisions about your business that allow you to plan for future investment or make necessary cost cuts.